Statutory deduction computed on total income before the same deduction is allowed under income-tax law.

For the statutory deduction under income-tax law, total income is computed under the normal computation provisions before deducting the amount available under that deduction itself. Several High Courts had taken this view, and the later amendment to the relevant sub-clause was noted as bringing the text into line with that interpretation. The contrary Karnataka view was not followed. The result is that the deduction is calculated on income before allowance of the deduction under the same provision, which favours the assessee.

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Issues: Whether the statutory deduction under section 36(1)(viii) of the Income-tax Act, 1961, is to be computed on the total income before deducting the amount allowable under that provision.

Analysis: The issue was answered by following the consistent view taken by several High Courts that, for the purpose of section 36(1)(viii), total income is to be computed in accordance with the provisions governing computation of income, excluding the deduction under that very provision. The Court also noted that the relevant sub-clause had later been amended to align with that interpretation, and that the contrary view of the Karnataka High Court did not accord with the affirmed position.

Conclusion: The question was answered in the affirmative and in favour of the assessee; the deduction is to be calculated on the total income before the allowance under section 36(1)(viii).

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